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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A firm that has market power in the factor market (a wage-setter)






2. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






3. A good for which higher income decreases demand






4. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






5. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






6. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






7. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






8. Entry (or exit) of firms does not shift the cost curves of firms in the industry






9. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






10. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






11. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






12. Ed = 0 - no response to price change






13. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






14. The total quantity - or total output of a good produced at each quantity of labor employed






15. Ed > 1 - meaning consumers are price sensitive






16. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






17. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






18. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






19. The imbalance between limited productive resources and unlimited human wants






20. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






21. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






22. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






23. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






24. AFC = TFC/Q






25. Ed = 8 - infinite change in demand to price change






26. A good for which higher income increases demand






27. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






28. Es = (%dQs) / (%dPrice)






29. The most desirable alternative given up as the result of a decision






30. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






31. Models where firms agree to mutually improve their situation






32. Ei > 1






33. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






34. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






35. The ability to set the price above the perfectly competitive level






36. MUx / Px = MUy/Py or MUx/MUy = Px/Py






37. Exists at the point where the quantity supplied equals the quantity demanded






38. Product demand - productivity - prices of other resources - and complementary resources






39. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






40. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






41. TR = P * Qd






42. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






43. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






44. Costs that change with the level of output. If output is zero - so are TVCs.






45. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






46. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






47. When firms focus their resources on production of goods for which they have comparative advantage






48. Ed = 1






49. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






50. 0 < Ei < 1